Bed Bath & Beyond Looks Strong Going Into Earnings

For the past year, Bed Bath & Beyond (NASDAQ: BBBY) has been focused on improving its customer service within its stores. The retailer has attempted to do this in a number of ways, including making efforts to increase online retail sales through omnichannel opportunities and revamping its websites to streamline the shopping experience. In addition, Bed Bath & Beyond announced an initiative to introduce a food and beverage section in its namesake stores that includes products from its World Market stores.

A year later, investors will find out how successful Bed Bath & Beyond was in implementing these changes. The company reports its fourth-quarter and full-year earnings for fiscal 2013 after market closes on Wednesday, April 9. It will be interesting to see how it actually performs against analysts' estimates.

Lowering expectationsBed Bath & Beyond on March 7 provided an earnings update for the fourth quarter. The company neither reaffirmed nor raised its original earnings projections but instead lowered the guidance. It now expects earnings to fall in the range of $1.57 to $1.61 a share in the fourth quarter from an initial range of $1.60 to $1.67 a share.

Bed Bath & Beyond announced that this adjustment was the result of bad weather conditions throughout the winter months. According to the company, this "included 464 times a store was closed for a full day and 1,923 times that a store was closed for a partial day."

These closures and delays halted stores from operating, thus preventing sales from taking place. In fact, Bed Bath & Beyond has stated that comparable-store sales were negatively affected by the unfortunate weather conditions by 2% to 4%, leading to a smaller-than-expected comparable sales increase of 1.7%. Analysts have since updated their own estimates to be more in sync with that of Bed Bath & Beyond.

Current estimates for the quarter and full year While Bed Bath & Beyond made great strides throughout fiscal 2013, its fourth- quarter performance is expected to be slightly worse than the same quarter a year ago. Once again, this is primarily a result of poor weather conditions, causing operations to stop for hours and even days.

Keeping that in mind, investors should look past the short-term problems the company experienced and more toward the gains the company has made: its expanded omnichannel initiative via the introduction of new technology and data systems in its stores along with the debut of a new website for Buy Buy Baby and the redesign of the Bed Bath & Beyond website.

For the quarter, analysts estimate earnings per share of $1.60, $0.06 lower than the year-ago quarter. Revenue is expected to fall by 5.3% to $3.2 billion from $3.4 billion. Thankfully, net sales and earnings are expected to increase for the full year compared to the previous year.

Fiscal 2013 will almost certainly show decent growth over FY 2012. Bed Bath & Beyond's success with its decentralized management structure in delivering exceptional customer service along with its ongoing efforts to improve online retail sales and boost stores' product assortment are evidence that this retailer keeps getting better at what it does.

Analysts estimate 5.6% revenue growth from the previous year with net sales expected to total $11.5 billion. In addition, full-year earnings per share are expected to reach $4.80 a share, a 6% increase from fiscal 2012's diluted earnings per share of $4.53. It's quite possible that Bed Bath & Beyond was able to achieve these figures despite having a tough fourth quarter.

Beating the competitionBed Bath & Beyond is expected to surpass competitors Target (NYSE: TGT) and Wal-Mart Stores (NYSE: WMT) in terms of revenue and earnings growth. Both competitors reported fourth-quarter and full-year earnings in February. It is understandable that Target had a rough fiscal 2013 after making headlines on account of a data breach within its systems. The data breach leaked customers' personal information including payment details, and it ultimately affected 110 million people.

Unfortunately for Target, sales fell along with earnings, as customers flocked elsewhere to do their shopping. Some vowed never to return again. While Wal-Mart had a better year than Target in terms of both revenue and earnings performance, net income fell by 5.7% from the previous year. By looking at the charts below, Bed Bath & Beyond is looking strong going into fourth quarter and full-year earnings and will likely beat the competition.

Revenue

Company Name

FY 2012 Revenue

FY 2013 Revenue

Growth

Bed Bath & Beyond

$10.91 billion

$11.52 billion (estimate)

5.6% (estimate)

Target

$2.999 billion

$1.97 billion

(34.3)%

Wal-Mart Stores

$468.65 billion

$476.29 billion

1.6%

Earnings Per Share

Company Name

FY 2012 EPS

FY 2013 EPS

Growth

Bed Bath & Beyond

$4.53

$4.80 (estimate)

6% (estimate)

Target

$4.52

$3.07

(32.1)%

Wal-Mart Stores

$5.01

$4.85

(3.2)%

Foolish takeawayFoolish investors should keep their eyes on Bed Bath & Beyond. The company continues to improve its omnichannel business, introduce new products, expand operations, and provide exceptional customer service through hiring locals to manage its stores.

Furthermore, Bed Bath & Beyond's competitive prices and coupons are luring customers through the doors and forcing competitors to either mark down their products or offer better discounts. Investors would be wise to do more research on Bed Bath & Beyond before the company's earnings release on April 9. Expect results to come close, if not in-line, with analysts' estimates.

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